India FY25 GDP: India's gross domestic product (GDP) is projected to grow at 6.6 per cent in 2024-25 (FY25), aided by a revival in rural consumption, a pickup in government consumption and investment, and strong services exports. The Reserve Bank of India (RBI) said in its December 2024 issue of the Financial Stability Report (FSR) released on Monday, December 30, that the ecomomy shows resilence and is on track for recovery in 2025.
The central bank said during the first half of 2024-25, the real GDP growth rate year-on-year (YoY) moderated to six per cent from 8.2 per cent and 8.1 per cent growth recorded during H1 and H2 of 2023-24, respectively. Despite this recent deceleration, India's structural growth drivers remain intact.
According to the RBI, the real GDP growth is expected to recover in Q3 and Q4 of 2024-25 supported by pick up in domestic drivers, mainly public consumption and investment, strong service exports and easy financial conditions. Earlier this month, the RBI cut its growth forecast for the current fiscal to 6.6 per cent from 7.2 per cent projected in June.
On inflation, RBI said that the disinflationary effect of a bumper kharif harvest and the rabi crop prospects are expected to soften prices of foodgrains. On the flipside, the rising frequency of extreme weather events continues to pose risks for food inflation dynamics. According to the RBI, the persisting geopolitical conflicts and geo-economic fragmentation can also impose upside pressures on global supply chain and commodity prices.
"The soundness of scheduled commercial banks (SCBs) has been bolstered by strong profitability, declining non-performing assets and adequate capital and liquidity buffers. Return on assets (RoA) and return on equity (RoE) are at decadal highs, while the gross non-performing asset (GNPA) ratio has fallen to a multi-year low," said RBI.
It also said that macro stress tests demonstrate that most SCBs have adequate capital buffers relative to the regulatory minimum threshold even under adverse stress scenarios. Stress tests also validate the resilience of mutual funds and clearing corporations.
New RBI Governor Sanjay Malhotra said in his foreword to the report that prospects for the Indian economy are expected to improve in 2025 thanks to high consumer and business confidence. In the RBI's bi-annual report, Malhotra said that despite global uncertainties, the Indian economy is expected to pick up in the second half of the current fiscal.
“Notwithstanding the uncertainties shrouding the global macro-financial ethos as it unfolds, prospects for the Indian economy are expected to improve after the slowdown in the pace of economic activity in the first half of 2024-25,” said Malhotra, who took over as the central bank's 26th governor earlier this month.
RBI's report comes one day after Deloitte said on Sunday that the Indian economy is likely to grow at 6.5-6.8 per cent this fiscal and slightly higher between 6.7-7.3 per cent in FY2026, boosted by domestic consumption.
Deloitte India Economist Rumki Majumdar said the growth in the first half of the fiscal year 2025 turned out to be slower than estimated as election uncertainties followed by disruptions in activity due to heavy rainfall and geopolitical events weighed on domestic demand and exports.
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However, she added India continues to show resilience in certain pockets that are worth noting -- be it in consumption trends, services growth, the rising share of high-value manufacturing in exports, or the capital market.
According to Deloitte, the government's focus on the infra development, digitisation, and attracting foreign development index (FDI) will be the additional growth booster, enhancing overall efficiency. "We remain cautiously optimistic and expect the growth rate to remain between 6.5 and 6.8 per cent this fiscal year and slightly higher between 6.7 and 7.3 per cent in FY2026," Rumki Majumdar told news agency PTI.
